AM Best, an international credit rating agency specialising in the insurance sector, has identified improving underwriting results in the US commercial motor insurance market, following several years of sustained financial pressure.
In its latest Best’s Market Segment Report, the agency highlights a reduction in annual underwriting losses and further improvements during the first half of 2026, although challenges remain, particularly in liability coverage.
The report, titled, Commercial Auto May Finally Be Seeing Light at The End of The Tunnel, examines the factors influencing the sector’s financial performance, including claims costs, premium pricing, reserve development and the impact of social inflation.
AM Best states that commercial motor insurance has consistently produced weaker underwriting results than other US property and casualty insurance lines over the past decade. The sector has recorded annual underwriting losses throughout this period, with the exception of improvements during the peak COVID-19 years, when fewer vehicles on the roads contributed to lower claims activity. Even then, underwriting results remained negative.
The agency reports that the sector’s underwriting loss narrowed to USD $2.2 billion in 2025, a 55% reduction compared with 2024. This improvement continued into the first half of 2026, when the direct loss ratio reached 66.1, slightly below the level recorded during the same period a year earlier.
Christopher Graham, Senior Industry Research Analyst at AM Best, said: “The commercial auto market remains a hard market outlier compared to other property and casualty lines of coverage, where broad market conditions have become more competitive with prices softening.”
Graham further added: “Although commercial auto pricing data indicates that the magnitude of renewal pricing increases has declined somewhat, year-over-year increases are still needed, indicating market conditions across property and casualty lines of business have distinct differences.”
According to AM Best, the commercial motor insurance market continues to experience different financial outcomes across its principal coverage categories. Liability insurance remains a significant source of underwriting losses, while physical damage coverage has delivered more favourable results.
The report records an underwriting loss of more than USD $4.6 billion for commercial motor liability insurance in 2025. In contrast, the physical damage segment achieved a gain of USD $2.4 billion. AM Best notes that this result was achieved despite increasing vehicle repair and replacement expenses, including higher prices for components used in newer vehicles and rising labour costs.
David Blades, Associate Director of Industry Research at AM Best, noted: “Paradoxically, technology has helped lower auto accident frequency while also increasing the cost to repair vehicles when accidents occur.”
Blades continued: “However, commercial insureds that have been more proactive with fleet monitoring and maintenance have benefited from a reduction in the frequency of preventable accidents, which has likely aided overall auto physical damage profitability.”
AM Best also highlights the continuing influence of reserve adjustments relating to claims from previous accident years. Although adverse prior-year loss reserve development remains a factor in the sector’s results, the agency reports that its impact has diminished compared with earlier periods. Overall reserve deficiencies have also decreased, while the most recent accident year appears to have sufficient reserves, according to the report.
Market concentration is another feature identified by AM Best. Progressive Insurance Group retains its position as the leading commercial motor insurer in the US, with more than twice the direct premiums written by Travelers Group, which ranks second. The agency also notes that insurers concentrating on this segment have demonstrated an ability to operate through a prolonged period of underwriting pressure.
Social inflation continues to present challenges for commercial motor liability insurers, contributing to rising claims costs over the past decade. AM Best points to tort reforms in Florida as a development that has benefited personal motor liability insurers more substantially than their commercial counterparts. Nevertheless, the agency suggests that the more limited positive effects observed in commercial insurance could provide a reference point for other states considering similar legislative changes.
AM Best’s findings suggest that the US commercial motor insurance sector is beginning to make progress in reducing underwriting losses after an extended period of adverse results. However, the agency’s analysis indicates that sustained improvement will depend on insurers’ ability to manage liability exposures, maintain adequate loss reserves and respond to ongoing increases in claims and vehicle repair costs.
